The end of the Great Keynesian Experiment is upon us. Prepare accordingly.

Thursday, January 6, 2011

Looking Forward, Looking Back

Three important charts as we wrap up Thursday ahead of another BLS BS report tomorrow am.

First, here are 30-minute gold and silver charts. You can see the decline in all its glory but you can also see the future. In gold, a break of 1365 would clearly be bad. However, a move back UP through 1385 would be very positive. Silver looks better and may lead big bro gold higher. As long as the 28.60-80 area holds, we look fine. A move back UP through 29.40 begins the short squeeze and a move through 29.60 may cause a panic, short-covering rally back to near 30. For what its worth, however, we do know that both metals rest tonight at the low end of the recent ranges.

OK, now here's something else we know. The $ rally from Tuesday caught Ole Turd by surprise but, as of yet, all the $ has done has been to move back to the top of its recent range.

Here's what I'm getting at: The $ has moved surprisingly higher on expectations of an improving economy and employment. As you know, I think this is all crap, spin and hyperbole. The BLS may issue a slightly better than December number tomorrow but this nonsense of 400M+ new jobs is exactly that...nonsense. My belief is that, post report tomorrow, the USDX will sell off back toward the middle of its range and the PMs will rally back to their middle. A sort of mean reversion, if you will.

11:50 UPDATE:
It's late and I'm tired but here I am, still searching for clues as to the short term direction of PM price.
Here's a little something to chew on. While gold and silver traded and closed higher on the Death Star back on Monday, copper was down all day. Copper then played along in the beatdown of Tuesday and Wednesday. After bouncing, it rests tonight on pretty significant/important support above 4.28-30. I think we'd better watch copper very closely tomorrow for clues of next week's PM performance.

In an earnest effort to help as many silver longs as I can I will relay information as I know it.

Major hedge fund traders are going to be buying hundreds of millions of dollars of March contracts during the last 3 weeks of February. The strategy is simple-force Comex to pay a hefty premium on contracts that CANNOT be delivered. Will this work? It worked like a charm in December. Those guys were all kicking themselves because they should have bought 10 times the amount of contract that they actually had in December.

This time around, they are getting everyone they know to get involved in this trade. They will pool their money together in order to get a large number of contracts so that Comex will not be available to deliver-thus forcing a hefty premium. These former traders are gonna pull a train on Blythe with all their hedge fund buddies and there is not a thing Blythe can do about it.

HOWEVER THERE IS A CAVEAT!!!

These traders have gotten word in the last 48 hours, that Blythe and The Morgue is about to undertake a major raid on GOLD in the hopes that silver will sell off too. Therefore, these traders are advising their colleagues to refrain from buying March silver contracts unless silver breaks $31 again. Their understanding is that Blythe cannot effectivley execute a silver selloff but Blythe and The Morgue can still execute an effective GOLD SELLOFF.

If and when this GOLD selloff comes, scheduled for this Friday or perhaps next week at the latest, Blythe is hoping that gold will break $1300 and go as far down as $1250. Blythe will be short selling intermitently in the silver pit but her main goal is to cover as many silver contracts as possible.

Once this Gold induced selloff is done watch for the mother of all rally in the silver pit. The hedge funds will be buying like crazy, but the MAIN assault will not take place until February wheren these former traders expect a rise of at least $10 (which was what happened to silver from October going into December).

December was just a dry run (RAID) on the Comex. The success and ease of that RAID has emboldened these traders to re-try the same scheme with a lot more money this go around (March delivery). The only defense Blythe has is to engineer a GOLD SELLOFF in the next two weeks in order to suppress silver so that she can cover her SILVER contracts.

So yes, I am very bullish on silver since I know that Comex cant deliver this March, but am expecting a selloff from a gold induced intervention.

I have been tasked by Blythe's former traders to spread the word about the fact that there is not enough physical silver in the world to cover The Morgue's short contracts. That is my role.

The link provided in the first comment from Dave leads to a quite interesting discussion and further explanation of the thesis/idea. I'm WAY out of those league's and not smart enough to know if it's all real, but it sounds good and I hope they succeed in destroying the WW and her EE minions.

From Harvey,"todays volume on the Comex was equivelant to 63% of the worlds annual production of Silver.Huge problems for the EE,can,t shake the leaves off the tree as they want physical,the more they knock the price down the more unshakable leaves appear.Very,very interesting times.

Dave, they will need a reason for the selloff. Bac Fraudclosuregate? The Fed's ownership of 9/10ths of the MBS will not be good to the Fed's holdings. So monie should not run to the dollar. Once again, what would trigger a selloff in PMs?

I like to look at this finviz page for an overview of the markets. http://finviz.com/futures_charts.ashxLately it seems like the commodities have stalled out or are trying to roll over. Some of the major currencies have reversed rather sharply and the dollar is moving up pretty strongly to resistance. With the latest bond spreads in the PIIGS widening and other news out of Euroland, I have to wonder if a dollar breakout may be in the works. What a coup for the EE if all the bulls pressing for a move up can be caught in a bidless market on a news event smackdown. PM.s have been a little anemic lately and a stop run could really hurt overleveraged players. We've come a long ways in a short period since the Jackson Hole speech that started this run in commodities and nothing goes up in s straight line. A pull back to $23-24ish would be a 50% retrace and a good level of consolidation from the recent past. Not predicting this will happen, just sayin'.I still have a shitty taste in my mouth from the third quarter of 08 when price got jammed from $17 down to $10 rather abruptly and I puked my ass. One of my more memorable losses. I didn't ride it all the way but enough be sure I was good and wrong on the trade.Don't get me wrong, I'm as bullish as anyone long term and physical buys are a no brainer. But the futures markets... Leverage kills. I'm waiting to see how the market acts after NFP in the morning and if it doesn't seem like silver wants to go up I'm waiting for a puke of some kind before entering. I don't trust this rally right now.

I've been continuously talking to my co-workers about buying silver. It's a tough battle trying to explain why I would make such a purchase. Most of them are the "sheeple" we describe, but a few do understand the values of metal. One thing that I thought was funny is a lady told me to safe-guard it and put the silver in the bank. I laughed and she looked at me strange. I said, "Did you know that there was a gold confiscation act back in 1933?" Her eyes opened as if that couldn't be! Nevertheless, I think I might be able to enlighten a few about fiat vs. PMs. It's a slow but steady war on the frontlines against JPM and the rest of the EE.

just out of curiosity how many oz's of physical silver stashed away would make all you folks comfortable given our present economic environment...not in dollars mind you but ounces...I'm just curious as to that comfort level...please respond...I'll will repost this often to get an idea...

Here is a chart I drew for the past week that shows a wedge suggesting that we are making higher lows than our inflection point a couple days ago.

You can look at the chart here:http://thehardrightedge.com/wp-content/uploads/2011/01/10.jpg

It is rumored that there are a lot of shorts that need to be covered if silver was in the 32-33 range, giving full more reason than nefarious intentions to keep silver below 32. Once we go up, we won't be coming back down.

Meanwhile, we are under attack during all of this. Mr. Ferguson is talking about treason!-I wrote my thoughts down in this long-in depth article about the Federal Reserve and its shareholders being the big banks!!! We need a revolution to clean this stuff up!

"Timpa, one of the big dogs in the PM business said recently on King World News that 500 oz is a minimum to see someone through a crisis." - Tim

Tim, he didn't say it was a minimum. The interviewer asked him whether, say 500 ounces would be enough, and the response was along the lines of, "if you have 500 ounces, you'll be fine." The minimum could be less than that.

FWIW, and however it ties in with other info on this thread, the latest McClellan Market Report earlier this week re-affirms their view that gold is going to be depressed in January and that Feb 8 is the target date for the major cycle low.

Other interesting tidbits:

The stock market cycle low target is the Jan 20 to 26 period. It will make you feel worse than it really is. Trade it appropriately or don't get shaken out (my take).

JPM and Blackrock are going to launch copper ETFs according to paperwork filed with the SEC in Oct. JPM in particular has built up a huge inventory of physical copper and is likely holding an offsetting huge short futures position to be effectively net neutral.

On a separate note, Harvey Organ reports SLV holding 350MM ounces of silver. JPM is the custodian of SLV. If it is attacked to force delivery, couldn't they use SLV metal and just stall any attempted audit forever?

I'm glad you found the link to be of note---interesting huh? I have to say that I'm with Frank on this one, I just don't have faith in a PMs rally at the moment. Much as I love to see gold bounce off 1365 over and over again (although my money got stuck between accounts the last few days so my 'short at 8.15 then buy the dip' strategy went unused.

For the record everyone, the 'Dave' of the Yahoo group post was the guy that sent the scoop to Metropole Cafe. Fiend's Brave Victim's real name is Adam. Just now we're all getting to know each other and all...

USD on the rise, short-term, because of problems in Europe. Rising USD will take all commodities lower. He expects rally in stocks, gold, silver, next week. He thinks ADP and NFP talk, that labor market is improving, is bogus.

If Italy were to go into a nominal GDP recession on account of its austerity programs, its debt-to-GDP ratio would likely be 130% by 2012. It's difficult to see how the market would ignore that.

Also check out Italy's debt compared to Germany. Here is the official EU Gross Government Debt Figures by country. Note that as of 2009, Italy's Debt is 1.763 Trillion EUR, about the same as Germany. Obviously the German economy is far bigger.

Moreover, I assure you that Italy has a lot of off-balance sheet debt. Some European countries took some very creative measures to reduce interest payments on debt. Italy was one of those countries.

I have seen Italy do HUGE (10+ billion USD) derivative transactions. Those transactions were all off-balance sheet but the cash flows behind the transactions were very real.

Italy was the number 1 customer for big investment banks in London for years. You won't find anything about that in the press.

In 2011, Italy will need to rollover a pile of debt. It will be interesting to see how that goes. I believe that if the 10-year yield hits 6%, an irreversible snowball effect similar to what Greece and Ireland went through is likely.

Whens the water safe to get back in? Forgive me, I do understand how difficult prognostication is (not asking for a date/time)... but rather, any idea's on what type of action we can expect to see, prior to the 'next big upleg' I keep hearing about?I've got my core holdings in PM's, and my account balance is currently below some numbers I said I would never go below, so I'm fighting the 'get to cash' emotion. I still feel the holdings are sound investments over the long term (love the Sprott!)... but the cash I do have on the sidelines is begging to get back in. We're crashing through fib's on this morning's raid.. so does that mean it's time to buy in when it crosses back over? A huge Payroll number's likely already priced in, so, buy when it misses? Monday morning reality will finally set in?I've gotten burned on a lot of false-start rallys that had all the markings of a turning point (only to get raided the next day).

This morning silver trade is interesting... The Hong Kong & London markets had three dips over night (notice: They aren't shear lines downward!) and then at NYMEX this morning, the spot has shot vertical. Seems like it may be part of a plan to transfer shorts overseas. Short outside the US (enter position), then buy up underwater position within the US (close position). We'll have to wait and see more ...

Almost exactly my situation too. I'm new at this, and had some spectacular gains taken off me (and more) the on the last couple of spikes. Ah the greed and fear! I'm learning fast, but the pile of cash I have left is small enough to scare me off getting back in, and the pile of physical will just never be big enough! Ah well, more interesting than plumbing!

Oh, while we're on the subject of physical. What are anyone's thoughts on how much gold to hold in relation to silver? I'm holding much more gold, because in the UK you have to pay sales tax (now 20%) on silver. Ridculous no? So while the increases sure look better for silver, I'm often more tempted to hold PHYS or something for silver, and keep physical gold for security.

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About Me

"Turd Ferguson" has been involved in the securites "industry" for over 20 years. He first received his NASD licenses in June of 1990. Ultimately disgruntled by the fraud known as "financial planning", he retired to a career as a serial entrepreneur in 2008. The Turd is NOT a soothsayer, a psychic or a witch. After all these years, he simply has a decent handle on the PM "markets". You can reach The Turd by email at tfmetalsreport@gmail.com. If you are polite and not an AGA, he will probably answer you in short order.

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